I haven’t talked recently about RSI’s “Way Ahead Portfolio” that I started at the fourth quarter of last year. As you may or may not remember I established this portfolio on October 1st with a hypothetical $100,000, allocated it to ten RSI fund selections of $10,000 each. All went well until November 2007 when many of the ETF/CEFs hit their 8% stop loss levels. These positions were sold and replaced with other funds. And so on. Now recently this January and March several funds hit their stops too. With the continued market turmoil I didn’t feel in a rush to establish new ETF replacement positions. Now the portfolio stands with only one position, ASA, plus cash, all totaling $90,420.23 for a loss of -9.58%. In the same timeframe the S&P 500 has lost -13%.
Okay then, what is the next step? It all depends on our belief system. If I think this market correction lasts for several weeks or months more, I sit tight on the cash reserves. If and when I believe the correction has ended, I will deploy the cash reserves into nine positions based on RSI’s selections. I have the choice of some conservative picks at first and then throw in some falling knife picks for higher risk/reward choices if the bull takes off. Again, it all depends on whether I believe the market is making a convincing move. With today’s strong showing I believe that this market will run for a while longer…maybe through the next couple of quarters. Therefore I have decided to add seven new positions to the existing lone fund position ASA. Six are from RSI’s most recent ETF/CEF picks and one Catch a Falling Knife (CFK) speculation. The additions are:
Since we want to maintain a portfolio of ten funds, I will divide up the portfolio’s cash reserve into nine equal parts of $8,842 and place buy at the open orders for shares of each fund. I’ll report the transaction results after tomorrow’s close. I’ll let RSI come up with the remaining two fund choices in the ensuing days.
April 2, 2008 at 6:50 am |
Why sit on cash when purchasing more shares in these funds at these prices will put you in a better position when the market recovers?
This has been labeled one of the worst decades – which still has several years to go yet – for investing. Returns are low and anyone trying to calculate their returns has fallen prey to the same thinking that good investors shun. Buy now when the market is low and reshuffle portfolio holdings when the market is high.
Your mutual fund manager is maintaining a cash reserve in each of those funds for people who, did not invest hypothetically, but with real dollars that feel as though they should sell.
Best of luck with calling the end to this correction. No one in the history of investing has been able to do it with any consistency. Keep your money active!
April 2, 2008 at 11:32 pm |
With this past correction causing many our stops to be triggered, I believed that the monies should be held as cash reserves until there was a reasonable expectation that the correction had run its course. There were opportunities to re-deploy the cash had there been some solid candidates with good long-term prospects.
Since the hypothec portfolio started at $100k, there was no ability to add to the portfolio holdings as you suggested. I agree that reshuffling and/or rebalancing positions at a higher level can be a good strategy. I often do that with my real money portfolios.
Calling bottoms is difficult and often we find it necessary to tale a stab at guessing the cyclical transitions.